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A Guide on Form 16 for Employers & Employees

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Team sumHR
January 17, 2023

As every financial year ends, the Income Tax Department sends reminders to file your income tax forms on schedule. When submitting your ITR, Form 16 is one of the most typical financial forms you will encounter. With over 8 crore taxpayers, including individual and corporate, out of 1.36 billion people in India pay tax. Here's a short look at Form 16 and how it can help you conveniently file your ITR.

What Is Form 16? 

Form 16 is an employer-provided certificate under Section 203 of the Income Tax Act and submitted to the Income Tax Department (IT Department). It specifies how much tax was deducted by the employer from your taxable salary and when it was filed to the IT department. 

If you change employment during the year or worked for many employers simultaneously and tax was deducted at each location, you must acquire a Form 16 from each of them. However, if there was no tax deduction from your salary by your employer(s) because your income for the year was less than the tax-exemption level, they need not issue Form 16. 

Eligibility For Form 16

Form 16 is available to every salaried individual whose employer has deducted tax at the source. Whether or not your income falls under the tax exemption level, your employer must provide Form 16 if they have deducted tax from your salary. 

What Is The Purpose Of Form 16? 

Form 16 makes it simple to file your income tax returns. It is documentation that the company reported the money deducted as TDS from your salary to the authorities. It also explains how your tax was calculated using the investment declarations you made at the start of the fiscal year. This includes any allowances provided by your firm as well as any other information that may affect the tax amount, such as housing rent, medical costs, loans, and so on. These specifics will assist you in filing your income tax returns. 

When Does Form 16 Become Available? 

The employer must issue Form 16 on or by May 31 of the assessment year, allowing you adequate Income Tax return filing time before the due date. To clarify, the fiscal year (FY) is the period from April 1 to March 31 in which you received the money. The assessment year is the year after this income is assessed and taxed.

What Are Forms 16A And 16B? 

Form 16 provides the information you need to correctly file your Income Tax return. It is divided into two, Part A and Part B, which reflect the majority of your information. When filing IT returns, these parts of Form 16 are critical. Here's a closer look at the Form 16 components.

Part A of Form 16 contains basic information about the employee and the employer, such as: 

  • Employee details 
  • Employee's address details
  • Employee's PAN 
  • Employer details 
  • Address of the deductor 
  • Employer's PAN 

It also includes information on how much tax was deducted, when your company placed the money in the Central Government Account, and the Challan number the government gave.

Part B of Form 16 thoroughly describes how your tax was calculated based on your investment declaration at the start of the fiscal year and the evidence of investment filed afterwards. It also provides information about additional allowances offered by your employer that may be required for tax purposes. Part B also comprises any additional information you may have provided to the employer, such as house rent, medical costs, EMIs paid on your home loans, and tax-free gifts. The specifics include the following: 

  • Annual gross pay
  • Exemption benefits under Section 10 
  • Employment Tax 
  • Deductions under Section 80C include (although the list is not exhaustive) items such as Public Provident Funds (EPF/PPF), Housing Loans, National Savings Certificates, Life Insurance Plans, Tax-Saving Mutual Funds (ELSS), and any other tax-saving investments. 
  • Deductions under other sections (80E, 80G, 80TTA), including (without limitation) National Pension Scheme, medical claims, donations exempt under section 80-G, and other deductions. 

Form 16 and Form 26AS Distinctions 

Form 26AS contains the details if the deductor has deposited the tax withheld at source to the Central Government Account. The TRACES portal (TDS reconciliation, analysis, and correction enabling system) website offers a download for the form. 

Form 26AS has all the information from Forms 16A and 16B but not all of the information from Form 16. Only the TDS amount the deductor deposited with the Central Government account is specified on Form 26AS. This page does not include a breakdown of your pay and deductions by different areas.

Advantages Of Form 16 

The TDS amount has been deposited with the Central Government account, and Form 16 serves as evidence that neither your employer nor the deductor has committed fraud nor taken any funds for unauthorised purposes. You should be aware of the various uses of Form 16.

Form 16 is a declaration of your "income from salary" that may be provided upon request to various authorities and businesses annually. The form provides several benefits, including the following: 

  • Assistance with income tax returns 
  • Evidence of income source 
  • Check the documentation outlining how your taxes were calculated for any errors 
  • Check all of your tax-saving investments in one spot
  • Evaluation and approval of loans 
  • Aid in processing Visa 

When changing employment, Form 16 will assist your new employer in determining your tax obligations by using the deductions made by your prior employer. 

You may check for any overpaid taxes as the paperwork is connected to the tax credit, which will help you collect your tax refunds, if any. 

How Can I Obtain Form 16 From My Employer? 

Every employer who has withheld any tax at source is required to provide you with Form 16. Employers can print or download a soft copy of Form 16 from their account on the TRACES Portal. Your company may also direct you to a third-party online payroll system where you may access and download your Form 16 from. If you misplace your Form 16, you may always ask your employer for a replacement copy. 

How Can I Obtain Form 16A? 

You can request Form 16A from your banking financial institution. By connecting to your account online, you may download Form 16A and do another check. Form 16A should be provided to you by your renter if tax deductions have been made from the rent revenue. Suppose you are a commission agent and request Form 16A from your employer for any taxes the organisation may have withheld from your commission.

How Can I Obtain Form 16B? 

Ask the purchaser of the immovable property to send you Form 16B if tax was deducted from the sale price. The deductor must provide 16B within 15 days of filing Form 26QB. Form 16B can be created and downloaded from the TRACES (TDS reconciliation and analysis correction enabling system) portal.

Can Income Tax Returns Be Filed Without Form 16? 

The short answer is yes. If you are familiar with the information listed in Parts A and B of Form 16, you can submit income tax returns without it. Find your employer's name, address, PAN, and TAN by asking. Consult a professional with your salary statement to learn more about your basic pay, benefits, additional deductions, and gross pay. 

Gather all the investment and other documentation you may have previously given to your HR department as proof of investment. You may file your returns using the data in all the documents mentioned above. 

Wrapping Up

One of the most crucial tasks you must complete as a salaried employee is filing your income tax returns; thus, Form 16 is necessary to obtain. Most of the data necessary to file your income tax returns in India is included on Form 16, one of the most significant tax forms. You can simplify the procedures for filing your ITR by using Form 16's various components. Therefore, it is crucial to completely comprehend Form 16 and its nuances. 

sumHR is an all-in-one HR management solution for all kinds of businesses. It provides complete onboarding processes and payroll processes. sumHR provides payroll within minutes and also automates TDS and tax filing. Trusted by over 200 companies in India with its simple-to-use integration and multi-feature tools that make it suitable for every organisation.

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Team sumHR
SumHR is a flexible and configurable end-to-end HR Software/HRMS which help HR teams automate the HR Processes, and improve the employee's HR experience.
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